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U.S. Indexes Fall Sharply on Jobs Data

Stocks tumbled Friday in one of their sharpest declines this year, leaving the Dow Jones industrial average firmly below 10,000, as a disappointing jobs report cast a pall over the nation’s economic recovery.

New worries that the financial crisis in Europe may be spreading — this time, to Hungary — added to investors’ anxiety.

The sell-off was swift and brutal, with the broad market losing roughly 3.4 percent. The slide left major indexes in the red for the first week of June.

All 30 of the Dow Jones industrials fell, some by more than 5 percent. After staying above 10,000 for days, the Dow Jones industrial average fell 323.31 points, or 3.2 percent, to close at 9,931.97. The broader Standard & Poor’s 500-stock index was down 37.95 points, or 3.44 percent, to close at 1,064.88. Both ended the week 2 percent lower, and are back to where they were in early February.

For days, investors had awaited the monthly unemployment report from the Labor Department to help them gauge the pace of the economic recovery. They were sorely disappointed: The Labor Department’s report showed that the private sector created a mere 41,000 jobs in April, far short of expectations of 150,000 to 180,000.

And the number of long-term unemployed, Americans out of work for 27 weeks or more, remained at its highest level since the Labor Department began collecting such data in the 1940s.

Adding to the unease were concerns that the financial troubles in Europe, particularly in Greece, Portugal and Spain, might be spreading to Hungary, after the government there sent worrying signals about its finances.

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Bloomberg News

Hungary’s currency, the forint, sank in value, as did the beleaguered euro, which weakened to $1.1967 at the close in London, its lowest level since March 2006.

“That put all the weight on traders’ shoulders,” said Guy LeBas, chief fixed income strategist for Janney Montgomery Scott. “And they collapsed.” The jobless numbers and the risk of European debt troubles spreading “brings about a lot of worries for investors,” said Dan Faretta, senior market strategist for LaSalle Futures Group.

The Nasdaq composite index fell 83.86 points, or 3.64 percent, to 2,219.17. It ended the week about 1.6 percent lower.

Amid the tumult, investors sought safety in United States Treasury securities. The Treasury’s benchmark 10-year note rose 1 12/32, to 102 16/32, and the yield, which moves in the opposite direction of price, fell to 3.20 percent from 3.36 percent late Thursday. The prospect that the jobs report would be strong had tempered some of the recent volatility in the market caused by the European debt crisis.

“I guess we set ourselves up for this,” said James W. Paulsen, chief investment strategist for Wells Capital Management. “When people build up to it, it is a pretty big letdown.”

While Hungary is not yet inside the euro area, investors have been concerned that the problems of the European debt crisis could spill over into other countries, raising risks for institutions with high exposure and affecting the health of countries with economic ties to Europe, including the United States. Win Thin, a senior currency strategist with Brown Brothers Harriman & Company, said Hungary’s economy was highly dependent on exports to Western Europe.

“This Hungary story has been around, but it is coming at a bad time when there are jitters about Western Europe,” Mr. Thin said. “That is a big reason why the euro took another downturn. The job reports did not help. I am not that worried about it, but the fact it happened now while markets are pessimistic is bad timing.”

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The New York Times

“My point is that Hungary is not directly related to the E.U., the euro zone and the euro; it is just the reminder,” he said. “It is again another country having debt issues.”

Among the hardest-hit sectors on the American market were financials, industrials and consumer discretionary stocks.

General Electric closed down 74 cents at $15.71, 3M shed $2.24 to close at $76.10, Citigroup lost 17 cents to close at $3.79 and Bank of America closed at $15.35, down 46 cents.

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In Europe, investors expressed disappointment in the American jobs report but also faced concerns about Hungary.

European stocks closed sharply lower. The CAC-40 in France was down 2.9 percent and the broad Euro Stoxx 50 shed 1.8 percent.

The yields on the benchmark 10-year bonds of Greece, Portugal, Belgium and Ireland rose. By contrast, those of safer German bonds fell.

Most commodity prices fell amid fears than an economic downturn would reduce demand for raw materials. Nymex crude oil for delivery in August fell $3.21, to $72.48 a barrel.

Gold rose, however, with the contract for delivery in August up $7.70, at $1,217.70 an ounce.

Matthew Saltmarsh contributed reporting.

A version of this article appears in print on June 5, 2010, on Page B1 of the New York edition with the headline: STOCKS AND BONDS; Report on Jobs Dashes Investors’ Hopes, and Shares Tumble. Order Reprints|Today's Paper|Subscribe